In recent years, the internet has been recognized as a powerful new medium that potentially can make consumer communication processes more effective. The internet presents an opportunity to build online personalized relationships with consumers. Advertisers have recognized the potential of online advertising, but early experiences with banner ad formats have been disappointing.
Advertisers, however, continue to recognize the internet's potential to streamline their advertising communication processes. It is a medium, that allows to track individual consumer's purchase and shopping behavior and to tailor advertising messages to the individual purchase and shopping needs of consumers, something that is not possible with traditional mass media, where advertising messages are generic, cannot be customized and where purchase behavior cannot be tracked. Further, the internet allows to measure the effect of advertising on consumer purchase behavior. Advertisers, finally, recognize the potential of realizing improved advertising delivery efficiencies that result from moving away from unfocused mass advertising to a more personalized and automated electronic delivery approach, where advertising exposure is confined to sending personalized messages only to those consumers who are potentially interested in the advertiser's product.
However, for a personalized advertising approach to be successful, advertisers need a standardized consumer profiling system that is portal and retailer independent. It is also necessary to develop a standardized consumer feedback measurement system which measures the effectiveness of the advertising portal and retailer independent. Without it, advertisers have to deal with the complexity of a multitude of different profiling and consumer feedback systems. This has proven to be a barrier to achieving the above described vision of ‘personalized advertising’.
In general, consumers prefer to browse aggregated retailer or portal websites over individual manufacturer websites when looking for product specific information. Therefore, it would be desirable for manufacturers if via a central system they could directly control their product related information displayed on retailer or portal. Specifically, it would be beneficial if manufacturers could control all the brand product presentations at the different retailer and portal websites, where the product is listed, from one desktop which is located, for example, at the manufacturer's head office. It would also be desirable for manufacturers if via a central system they were to be able to personalize the brand product presentations depending on the language and needs of an individual consumer.
Because manufacturers desire to avoid channel conflicts with their distribution partners, they cannot create distribution channels that compete with them or develop initiatives that risk taking over the retailer's consumer relationships. However, both manufacturers and retailers realize that they have in common that they have the same consumer client. They are gradually recognizing that a collaborative retail/manufacturing selling approach would be financially beneficial to both the retailers and the manufacturers. They are creating joint category management initiatives, collaborative IT platforms that automate ‘Planning, Forecasting and Replenishment’ processes and electronic data exchange systems between retailers and manufacturers. Both parties are also more frequently exchanging their consumer data.
In addition to the above, retailers are increasingly recognizing the potential of the internet as a new distribution channel that can improve the efficiency of their store operations and provide consumers with the convenience of home shopping and delivery. Thus, many such retailers have begun acquiring e-commerce competencies by either purchasing upstarts or building up expensive e-commerce organizations and systems themselves. The necessary information technology (IT) and marketing resources are a great financial burden for those retailers, who are traditionally accustomed to small margins and relatively low IT and marketing expenses.
Due to the lack of standard communication protocols between retailers and manufacturers, the process of building a retailer website is still very inefficient. Each retailer must independently build up category presentations. Further, each retailer must also build product presentations relating to the manufacturer's products which are listed in the retailer's on-line store. Traditionally, each retailer has been responsible for their in-store category presentations. However, the actual product brand presentation was a function, that was traditionally handled by the manufacturer via packaging and mass advertising. It is apparent that taking over this product brand presentation function from the manufacturer is very labour intensive for retailers. It is also evident that manufacturers are hesitant to relinquish control of the online presentation of their brands to the retailers. Thus, retailers need to assess whether their internet business will be able to absorb these additional in-house overhead costs or whether it is more practical to organize collaborative selling processes to outsource these non-core functions to manufacturers and or to IT (information technology) and marketing services specialists, that will be able to perform these tasks better and at lower costs.
There are currently software packages which are less expensive and perform better then the in-house developed store front and website systems described above. However, the marketing knowledge needed to use the personalization features of these software packages is still missing in these retailing companies. Thus, the communication potential of these systems is not being fully exploited. Adapting manufacturer brand presentations and retailer category presentations to individual consumer needs is a complex task. One way of simplifying the retailer task would be for the retailer to assume the retailer category presentation personalization function and to leave the product brand personalization function to the manufacturer. Such a collaborative approach would allow retailers to construct their categories from product brand presentations stored in a central database. This would make the process of creating retailer presentations more efficient. Further, this approach would ensure that the retailer category presentations would contain the latest product brand descriptions as well as product brand descriptions, that are automatically adapted to the needs of individual consumers.
For retailers, it would be ideal if, from one desktop at a head office for example, they could build the retail category presentations from the product brand descriptions stored in a central database and have the system personalize these product brand presentations depending on the language and needs of the consumer. A collaborative approach on a central platform would lower IT investments as it would avoid the need for each individual retailer to establish separate IT systems that link with its various manufacturers. A collaborative system with a central product presentation database and a standardized consumer profiling and purchase behavior tracking system would further avoid the need to define separate consumer profiles and feedback information protocols required for the exchange of consumer data between retailers and manufacturers, as well as make it possible to measure and to benchmark the effectiveness of brand and retailing presentations against each other. Absent a central product presentation database and a standardized profiling and consumer feedback system, separate consumer profile and feedback information protocols would have to be defined for each manufacturer-retailer relation, greatly reducing the benefit impact of the collaborative approach as well as its chances of success.
Traditionally, web portal designers have been successful in creating convenient and interesting content and information services, but most of them have failed to turn their efforts into a profit. As a result, most portals operate at a loss. Many portals have attempted to rework their business model, which has largely been dependent on banner advertising revenues. One solution which was proposed included using consumer-paid subscription models for interactive personal information, news, music and entertainment services. However, it is difficult to convince consumers that they should start paying for a service, which until now has been free. Other efforts by portals included requesting that manufacturers and/or retailers pay the portals for displaying their product brand and/or retail category presentations. Some have incorporated comparison shopping services that compare products based on price. These services do not have the support of manufacturers and/or retailers, who refuse to pay the portals for these services.
For interactive personal information, news, music and entertainment services to become profitable and to be able to compete against the classical mass media, like tv, radio, and print, it would be desirable to exploit the internet's personalized advertising delivery capabilities, which traditional mass media and its advertising cannot offer. To justify premium rates advertisement messages must be personalized. However, without a standard profiling and segmentation system for profiling consumers and measuring advertising impact on consumer purchase behavior, these new interactive media will not gain the acceptance of advertisers.
Telephone and cable companies have invested heavily in broadband and in third generation (3G) wireless infrastructure development. The telephone and cable companies hope to recuperate their investments through broadband information, news, music and entertainment services. Subscription-based models are one possible way for these companies to recuperate their investments. However, the consumer cost for these services is extremely high. Ad-based models, which are based on premium personalized ad messages, are another option for telephone and cable companies. This option reduces the cost to the consumer. For interactive information, news, music and entertainment services to be able to compete against the classical mass media, like tv, radio, and print, for example, it will would be desirable to develop and exploit personalized ad delivery capabilities, which is something that mass media cannot offer. To exploit these capabilities, advertisement messages must be personalized. However, again, without a standard profiling and segmentation system for profiling consumers, these new interactive services will not gain the acceptance of advertisers.
Premium ad-based models are only possible with a standard portal and retailer independent system for profiling the consumers that use these services as well as a standard portal and retailer independent system for measuring the impact of its advertising on consumer purchase behavior. Without it, individual personal information, news, and entertainment service would have incongruous segmentation, profiling, and measurement systems. As a result it is unlikely advertisers will be able to efficiently target their messages nor track the effectiveness of their advertising investments.
In addition to a need for standardized consumer, manufacturers, retailers, and portals need to consider the consumer's concern about their privacy. Consumers are aware that their behavior on the internet is registered and this is generally seen as unpleasant. In addition, consumers are also bothered by consumer address companies which send irrelevant messages commonly known as “spam” messages. These consumer address companies collect consumer profiles but do not reward consumers for providing this information. If consumers shopped at an aggregated shopping service that protects and respects their privacy, the above-mentioned privacy concerns would be greatly eliminated. Consumers could store their shopping needs and preferences on one central location and could maintain control over this information. Because this service could ensure that it would not sell and/or relay individual consumer profiles to third parties, the consumer could avoid receiving unwanted advertisements or messages. In exchange for this privacy guarantee, as well as other possible benefits, the consumer would permit their shopping habits and preferences data to be processed into valuable information which allows retailers and/or manufacturers to improve their product and/or category offers and to personalize their advertisements so that they are more relevant to the consumer.
Further, it is very inconvenient for consumers to repeatedly enter their shopping needs at different websites. An aggregated holistic profiling system, that creates a single consumer profile that captures a consumer's complete purchase and shopping behavior is preferable over a multiple of individual retailer systems that each capture only a part of the consumer's purchase behavior. This single profile would benefit the consumer and advertisers, as it would enhance consumer's shopping convenience as well as advertising impact by making advertising messages more relevant to consumers.